Norihiko Kato: The correct distribution of resources does not mean selling it at high prices, but making the right decision for future generations
This is an interview with the CEO of Khan Bank, Norihiko Kato, regarding the future economy and finance of Mongolia. Translated from Udriin Shuudin newspaper.
Please tell us about your opinions and views on Mongolia’s future?
I think that Mongolia’s economy is at a crucial stage right now. Nearly 80% of exports are provided by the mining sector. Both foreign and domestic companies and businesses are working to expand their possibilities. There is a definite need to improve infrastructure and transportation systems.
I think it would be wise to contribute major funding to infrastructure, as it will play an important role in Mongolia’s economic growth, for instance, the Tavan Tolgoi infrastructure.
Its value will significantly increase only if investors are introduced to plans and view how exactly the mining site will operate when it is completed.
I hope the Government will seriously consider this. The current work and progress of the private sector is very good. What is done in the next two years will determine how Mongolia will be in the future.
Compared to Middle Eastern countries, Mongolia has abundant oil reserves but a very low population. I have previously worked in Dubai, Abu Dhabi, and when they realized their oil reserves would soon be depleted, they lessened their dependence on oil exports and began developing other sectors.
Getting out of mining and mineral resource dependency is a very difficult task. Middle Eastern countries are attempting to improve their industrial sectors. They are attracting foreign investors through flexible tax policies and advanced infrastructure. Water and electricity supplies are already there, meaning the companies would not need initiative spending.
First of all it is important to pay attention to the education of the public, and let them understand what role mining companies like Tavan Tolgoi will play in the future; and focus on creating an economy which is not dependent on mineral resources alone.
What can Mongolia do to avoid becoming dependent on its mineral resource exports?
Mongolia has a number of advantages that Middle Eastern countries do not have. For example, the nation’s expenditure, income and deficits are open to the public. But in the Middle East, it is unknown what amount of wealth is being transferred to the Kings’ families.
In Mongolia, since these statistics are not hidden, it is possible to discuss and contemplate on how the wealth will be spent. Mongolia is in a very suitable position. Although foreign trade is currently showing deficits, but it will disappear when the economy of Mongolia becomes more stable and exports begin to increase within 2 – 5 years.
Mongolia must uphold a strategy to make sure that the future generation of Mongolians will benefit from today’s mining sector. The correct distribution of resources does not mean selling it at high prices, but making the right decision for future generations.
How is the European financial crisis affecting Mongolia?
The Mongolian economy relies on China, and China exports a large amount of goods to Europe.
The situation in Europe does not look good. It is thought that this down turn will continue for 2 – 3 years. If this continues like this there is a possibility that it will significantly affect the economy of China.
Nevertheless, the Chinese economy is estimated to grow by 7 – 8%, which is very good progress. Mongolia has a geological advantage. China imports mineral resources from Malaysia, Indonesia, and Australia. Since the quality of Mongolian mineral goods are as good as these countries, Mongolia will be very successful when the infrastructure is better developed and transportation expenses are further reduced. Additionally, to improve the quality of coal and to sell it at higher and regular market price, it is crucial that coal washing and refining plants be built.
While increasing the productivity of the mining sector, we also need to pay attention to the natural environment. This strategy should not only be carried out by mining companies but private companies as well.
Although the Chinese economy may stagger, Mongolia still has other options.
In 2008, copper made up nearly all of Mongolia’s exports, but today it is coal. So now the Mongolian economy is safe from the price instability of copper.
Please tell us about your opinions and views on Mongolia’s future?
I think that Mongolia’s economy is at a crucial stage right now. Nearly 80% of exports are provided by the mining sector. Both foreign and domestic companies and businesses are working to expand their possibilities. There is a definite need to improve infrastructure and transportation systems.
I think it would be wise to contribute major funding to infrastructure, as it will play an important role in Mongolia’s economic growth, for instance, the Tavan Tolgoi infrastructure.
Its value will significantly increase only if investors are introduced to plans and view how exactly the mining site will operate when it is completed.
I hope the Government will seriously consider this. The current work and progress of the private sector is very good. What is done in the next two years will determine how Mongolia will be in the future.
Compared to Middle Eastern countries, Mongolia has abundant oil reserves but a very low population. I have previously worked in Dubai, Abu Dhabi, and when they realized their oil reserves would soon be depleted, they lessened their dependence on oil exports and began developing other sectors.
Getting out of mining and mineral resource dependency is a very difficult task. Middle Eastern countries are attempting to improve their industrial sectors. They are attracting foreign investors through flexible tax policies and advanced infrastructure. Water and electricity supplies are already there, meaning the companies would not need initiative spending.
First of all it is important to pay attention to the education of the public, and let them understand what role mining companies like Tavan Tolgoi will play in the future; and focus on creating an economy which is not dependent on mineral resources alone.
What can Mongolia do to avoid becoming dependent on its mineral resource exports?
Mongolia has a number of advantages that Middle Eastern countries do not have. For example, the nation’s expenditure, income and deficits are open to the public. But in the Middle East, it is unknown what amount of wealth is being transferred to the Kings’ families.
In Mongolia, since these statistics are not hidden, it is possible to discuss and contemplate on how the wealth will be spent. Mongolia is in a very suitable position. Although foreign trade is currently showing deficits, but it will disappear when the economy of Mongolia becomes more stable and exports begin to increase within 2 – 5 years.
Mongolia must uphold a strategy to make sure that the future generation of Mongolians will benefit from today’s mining sector. The correct distribution of resources does not mean selling it at high prices, but making the right decision for future generations.
How is the European financial crisis affecting Mongolia?
The Mongolian economy relies on China, and China exports a large amount of goods to Europe.
The situation in Europe does not look good. It is thought that this down turn will continue for 2 – 3 years. If this continues like this there is a possibility that it will significantly affect the economy of China.
Nevertheless, the Chinese economy is estimated to grow by 7 – 8%, which is very good progress. Mongolia has a geological advantage. China imports mineral resources from Malaysia, Indonesia, and Australia. Since the quality of Mongolian mineral goods are as good as these countries, Mongolia will be very successful when the infrastructure is better developed and transportation expenses are further reduced. Additionally, to improve the quality of coal and to sell it at higher and regular market price, it is crucial that coal washing and refining plants be built.
While increasing the productivity of the mining sector, we also need to pay attention to the natural environment. This strategy should not only be carried out by mining companies but private companies as well.
Although the Chinese economy may stagger, Mongolia still has other options.
In 2008, copper made up nearly all of Mongolia’s exports, but today it is coal. So now the Mongolian economy is safe from the price instability of copper.
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